In this paper, arbitrability of disputes and respective Ukrainian laws and jurisprudence will be analyzed. As Ukrainian laws distinguish international commercial arbitration (foreign arbitration and commercial arbitration having the seat of arbitration in Ukraine) and domestic arbitration (arbitration between Ukrainian entities and individuals), in this paper only the matters related to enforcement of international commercial arbitration will be considered. This paper contains the results of the research conducted as a part of the comparative study of the concept of ‘arbitrability’, carried out under auspices of the International Bar Association Subcommittee on Recognition and Enforcement of Arbitral Awards.

I. SUMMARY

Ukrainian courts usually consider arbitrability in the context of validity of an arbitration agreement.

Ukrainian law defines persons capable of being a party to an arbitration (‘subjective arbitrability’) and specifies disputes which are not capable of being resolved by arbitration (‘objective arbitrability’). Rules related to subjective arbitrability are part of lex arbitri. The specific restrictions of objective arbitrability are part of lex fori, they are applied by the competent court irrespective of the seat of arbitration or the law governing the arbitration agreement.

After 2011 legislative amendments, Ukrainian courts still have not adopted a clear approach to the matter of arbitrability of corporate disputes and disputes out of public procurement contracts. Courts still mostly consider corporate disputes and disputes out of public procurement contracts non-arbitrable. Controversial jurisprudence only allows to come to a conclusion that disputes out of or in connection with agreements of alienation of participation interests might be considered not corporate and thus arbitrable.

I. ARBITRABILITY UNDER UKRAINIAN STATUTORY LAW AND JURISPRUDENCE

1.1. Notion of ‘arbitrability’

Foreign arbitral awards are enforceable in Ukraine pursuant to international treaties, such as the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘New York Convention’) and the European Convention on International Commercial Arbitration, or under the reciprocity principle which is presumed to exist unless proved otherwise.

International commercial arbitration having the seat of arbitration in Ukraine is primarily governed by the Law of Ukraine ‘On International Commercial Arbitration’ (the ‘Arbitration Act’). The Arbitration Act is an implementation of the UNCITRAL Model Law which mirrors the New York Convention exactly in giving the same reasons why a state may refuse to recognize or enforce an arbitral award (Article 36 of the Arbitration Act on arbitrability: the recognition or enforcement of an award may be refused if the court finds that the subject matter of the dispute is not capable of settlement by arbitration under Ukrainian law).

Although Ukrainian courts distinguish between (i) arbitrability for the purposes of recognition of arbitration agreements[26], (ii) arbitrability for the purposes of recognition and enforcement of arbitral awards[27] and (iii) validity of arbitration agreements[28], they usually consider arbitrability in the context of validity of an arbitration agreement. It results in controversial decisions when courts apply legislation effective as of the date of entry into the respective arbitration agreement.

1.2. Subjective and objective arbitrability

Ukrainian law determines:

(1) what disputes can be decided in arbitration;

(2) what types of disputes are the exclusive domain of national courts.

i. Subjective arbitrability

Pursuant to Article 1(2) of the Arbitration Act parties may agree to refer the following disputes to international arbitration:

(1) disputes resulting from contractual and other civil law relationships arising in the course of foreign trade and other forms of international economic relations, provided that the place of business of at least one of the parties is situated abroad;

(2) disputes between:

enterprises with foreign investment, international associations and organizations established on the territory of Ukraine,

disputes between the participants of entities specified in 2(a),

as well as disputes between such entities and other subjects of the law of Ukraine.

Arbitrability of disputes between participants of enterprises with foreign investments, and between such enterprises and any Ukrainian legal entity or person is completely in line with Article 26 of the 1996 Law of Ukraine ‘On Foreign Investments Regime’. It specifies that any dispute to which a foreign investor is a party can be brought to arbitration, including arbitral tribunals seated abroad, according to the parties’ agreement with the exception of disputes between the investor and the state over matters of state regulation of foreign investments and activities of enterprises with foreign investments. Those disputes are to be resolved in courts of Ukraine unless otherwise provided by the international treaties of Ukraine.

Thus, presence of a foreign element is crucial for determining the subjective arbitrability of a dispute.

It is worth mentioning that the above provisions of the Arbitration Act are applicable only to arbitration seated in Ukraine (as stated in Art. 1(1) of the Act). Thus, rules related to subjective arbitrability are part of lex arbitri.

However, other laws might establish restrictions of arbitrability which might impact the enforceability of international arbitral awards issued in Ukraine as well as foreign arbitral awards.

ii. Objective arbitrability

Ukrainian Arbitration Act does not provide for any specific restrictions of objective arbitrability of disputes. The notion of ‘commercial’ as applied to arbitrable disputes mirrors the one in the UNCITRAL Model Law. Ukrainian Civil Procedure Code (Art. 17) also does not establish any specific restrictions of arbitrability of civil law disputes.

The specific restrictions of objective arbitrability are stipulated in several laws which are applied irrespectively of the seat of arbitration or the law governing the arbitration agreement, those rules are part of lex fori.

The law of Ukraine ‘On International Private Law’ (Art. 77) lists types of disputes with foreign element which are the exclusive domain of the Ukrainian courts. Among those types of disputes the following are potentially relevant to international commercial arbitration:

- if a real estate under dispute is located in Ukraine (except for disputes connected with entry into, amendment, cancelation of agreements in public-private partnership projects, entered into by the Cabinet of Ministers of Ukraine, according to which the real estate is the object of such partnership, and the dispute is not related to emergence, termination, and registration of property interests in such object[29]);

- if a dispute is in connection with formalization of intellectual property rights that requires registration or issue of a certificate (patent) in Ukraine;

- if a dispute is in connection with registration or dissolution of foreign legal entities, sole entrepreneurs in Ukraine;

- bankruptcy cases, if the debtor was established according to the laws of Ukraine;

- if a dispute relates to issuance or cancelation of securities drawn up in Ukraine;

It is generally recognized that the above types of disputes are non-arbitrable as most of them need a third party to be involved (usually a state body) for the dispute to be resolved. Bankruptcy cases are not disputes in a formally legal sense in Ukraine.

iii. Debate over Article 12 of Commercial Procedure Code

The most significant restrictions of arbitrability were established in Article 12 of the Commercial Procedure Code of Ukraine (the ‘CPC’). In between 31.03.2009[30] and 01.03.2011, based on Article 12 of the CPC the courts considered as non-arbitrable the following disputes:

(1) disputes over nullification of non-regulatory acts of state and other bodies, enterprises and other entities;

(2) corporate disputes (‘disputes arising out of corporate relations between a company and its participant (shareholder), including a former one, as well as between the participants regarding establishment, activities, management, and dissolution of the company (except for labor disputes)’);

(3) public procurement contracts disputes (‘disputes arising in connection with entry into, alteration, cancelation, and performance of commercial contracts related to satisfaction of the state’s needs’).

Prohibition to bring corporate disputes to arbitration established in Article 12 of the CPC since 2009 clearly contradicted the rules of the Arbitration Act, which explicitly allowed to arbitrate disputes between an enterprise with foreign investments and its participant (shareholder), as well as disputes between participants (shareholders) of that enterprise. However, this contradiction has always been considered in favour of application of Article 12 of the CPC, as the Arbitration Act stipulated that if any other law established restrictions of arbitrability of certain disputes this other law should apply.[31]

The 2007 Guidance and 2008 Resolution being widely used by commercial and common courts allowed to deduce several types of disputes which should not be considered corporate disputes for the purposes of Article 12 of the CPC. Among those are disputes over the title in and transactions with shares (except for those arising from infringement of pre-emption rights).

Since 1 March 2011 important amendments have been introduced to Article 12 of the CPC: provisions on international arbitration were excluded. It meant that the restrictions of arbitrability became applicable only to domestic arbitration. However, the ambiguity of the wording of the CPC still leaves the room for a variety of interpretations.

1.3. Controversial jurisprudence

Although since 2011 there have been no reported cases that addressed the issue of whether new wording of Article 12 of the CPC restricts the capability of disputes mentioned therein to be settled by international arbitral tribunals, commercial and common courts continue to adopt decisions invoking non-arbitrability of corporate disputes. Common courts still refer to 2008 Resolution of the Supreme Court as a guidance in deciding whether the case considered by an arbitral tribunal was arbitrable.

Moreover, sometimes commercial courts still tend to support the approach that disputes out of or in relation to contracts of sale of participation interests (shares) in Ukrainian companies are corporate disputes and thus cannot be submitted to arbitration.[32] This view is generally consistent with the approach of common courts in cases upon requests for setting aside arbitral awards in disputes related to corporate rights in Ukrainian legal entities.[33] However, the position of the High Commercial Court of Ukraine expressed in its resolution of 15 April 2013 (case No. 07/5026/1561/2012), that disputes in connection with contracts of sale of participation interests in limited liability companies are not corporate, and therefore may be brought to arbitration, creates the basis for a 180 degree turn of the jurisprudence.

On 25 February 2016, the Presidium of the High Commercial Court of Ukraine issued the Resolution “On Certain Aspects of Jurisprudence in Disputes arising from Corporate Relations” of No. 4 (the ‘2016 Resolution’). The 2016 Resolution replaced the 2007 Guidance which contained the advice to commercial courts to consider corporate disputes non-arbitrable in international arbitration. The 2016 Resolution did not state that corporate disputes can be subjected to international arbitration, it did not mention non-arbitrability of these disputes as well. Thus, the 2016 Resolution added but little to the clarity of the issue of capability of disputes mentioned in Article 12 of the CPC to be settled by international arbitral tribunals. It is helpful, though, in determining the disputes which are not corporate (the Resolution contains the list of such disputes) and thus capable of being brought to international arbitration.

II. OVERVIEW OF UKRAINIAN CASE LAW

Raiffeisen Property Management GmbH sought the recognition and enforcement in Ukraine of the 2010 arbitral award issued by the arbitral tribunal of the Vienna International Arbitral Centre of the Austrian Federal Economic Chamber (the ‘VIAC arbitral award’).

The arbitral tribunal decided in favour of Raiffeisen in the dispute related to several agreements which envisaged the transfer of participation interest in Double W LLC to Raiffeisen.

In 2011, both the court of first instance and the court of appeal refused the recognition and enforcement of the VIAC arbitral award stating that the subject matter of the dispute which was the title to the share in capital of Double W LLC was not capable of settlement by arbitration under Ukrainian law.

On 9 November 2011, the High Specialised Court of Ukraine for Civil and Criminal Cases reversed the ruling of the court of appeal and sent the case back for reconsideration to the court of first instance, stating that:

“... the conclusions of the court of first instance that the dispute is a corporate dispute which is not capable of settlement by arbitration under Ukrainian law are groundless”.

On 30 November 2012, the court of first instance refused the recognition and enforcement. However, the court of appeal reversed that decision on 6 June 2013. The respective ruling of the court of appeal was then upheld by the High Specialised Court of Ukraine for Civil and Criminal Cases (ruling of 17 November 2014).

Court decisions in this case allowed to come to a conclusion that disputes out of or in connection with agreements of sale of participation interests might be considered arbitrable. The fact that the courts never discussed the impact of the 2011 amendment to Article 12 of the CPC on the capability of corporate disputes to be settled by international arbitral tribunals implies that courts still apply Article 12 of the CPC to both domestic and international arbitration.

[26] Article II (1) of the New York Convention (“… a subject matter capable of settlement by arbitration”).

[27] Article V (2)(a) of the New York Convention (“The subject matter of the difference is not capable of settlement by arbitration under the law of that country”).

[28] Article II (3) of the New York Convention (“... unless it finds that the said agreement null and void, inoperative or incapable of being performed”).

[29] The ‘public-private partnership’ exception comes into effect on 24 May 2016.

[30] Date of coming into force of the respective amendment to Article 12 of the CPC, so that the amended Article 12 contained prohibition to submit to arbitration (both domestic and international) 3 categories of disputes. Prior to that date Article 12 did not explicitly prohibit to arbitrate corporate disputes. However, already in 2007 the Presidium of the High Commercial Court of Ukraine advised commercial courts in the Guidance (Recommendations) “On Jurisprudence in Disputes arising from Corporate Relations” of 28.12.2007 No. 04-5/14 (the ‘2007 Guidance’) that “Members of companies ... are not entitled to subject corporate disputes related to the activity of companies, including those arising from corporate management, to international commercial arbitration courts” (Art. 6.2 of the Guidance). This gave the commentators the idea that the High Commercial Court broadly interprets exclusive subject-matter jurisdiction of commercial courts as determined in Article 12 of the CPC. On 24.10.2008 the Plenum of the Supreme Court of Ukraine passed the Resolution “On Jurisprudence in Corporate Disputes” (the ‘2008 Resolution’), which contained the same advice to all Ukrainian courts.

[31] Article 1(4) of the International Arbitration Act: ‘This Law shall not affect any other law of Ukraine by virtue of which certain disputes may not be submitted to arbitration or may be submitted to arbitration only according to provisions other than those of this Law’.

[32] Ruling of the Kharkiv Commercial Court of Appeal of 2 April 2014 (case No. 917/429/13-г).

[33] The High Specialized Court of Ukraine for Civil and Criminal Cases in its ruling of 5 February 2014 (case No. 6-53589св13) recognized that an award, in which the claimant’s title to corporate rights in a Ukrainian legal entity was recognized should be viewed as an award made in a corporate dispute.

[34] It is the only reported case in which the issue of arbitrability was addressed in the context of New-York Convention.

]]>http://arbitration-blog.eu/arbitrability-commercial-disputes-ukraine/feed/02016 ICSID Annual Reporthttp://arbitration-blog.eu/2016-icsid-annual-report/
http://arbitration-blog.eu/2016-icsid-annual-report/#commentsSat, 08 Oct 2016 16:07:47 +0000adminhttp://arbitration-blog.eu/?p=1459The Annual Report provides an overview of the activities during the past ICSID fiscal year, including information on developments in the ICSID membership and caseload, designations to the Panels of Arbitrators and of Conciliators, resolutions adopted by the Council, publications, and financial statements on the income and expenditures of the Centre.

]]>http://arbitration-blog.eu/2016-icsid-annual-report/feed/0Evidence and Proof in International Commercial Arbitrationhttp://arbitration-blog.eu/evidence-proof-international-commercial-arbitration/
http://arbitration-blog.eu/evidence-proof-international-commercial-arbitration/#commentsSun, 18 Sep 2016 20:45:42 +0000adminhttp://arbitration-blog.eu/?p=1418New books for arbitration practitioners, 'Evidence and Proof in International Commercial Arbitration : Scientific and Practical Guide' (in Russian - Download link) and 'Theory and Practice of Proof in International Commercial Arbitration: Monograph' (in Ukrainian - Download link) have been recently published by Konstantin Pilkov PhD, Associate Professor of the Department of International Private Law of Kyiv National Trade and Economics University, partner of Cai & Lenard, arbitrator of the ICAC at the UCCI.

The author presents the latest developments in the law of evidence in arbitration as well as best practices.

The books offer an integrated approach to evidence which includes comprehensive doctrinal analysis. Practical recommendation given in the books are meant to facilitate arbitration proceedings that are fair, accurate, and efficient.
Several chapters of each book are currently available on Cai & Lenard website.

Complete downloadable versions will be available after arbitration conferences in November.

The American Arbitration Association (AAA®) and its international division, the International Centre for Dispute Resolution (ICDR®), announced the establishment of the AAA-ICDR Foundation in May 2015.

The Foundation is a 501(c)(3) not-for-profit organization, and is able to solicit donations and provide grants to fund a range of worthy causes that promote the Foundation’s wide-reaching mission, which is to support the use and improvement of dispute resolution processes in the USA and internationally, including:

•Fostering measures that reduce potential escalation, manage, and resolve conflicts.
•Expanding the use of dispute resolution processes tailored to the conflict.
•Supporting research, education and initiatives promoting high quality, efficient and fair dispute resolution.
•Increasing access to justice in and through alternative dispute resolution.
•Encouraging collaborative processes to resolve public conflicts.
•Sharing expertise across diverse groups and cultures.
•Partnering with others dedicated to advancing the Foundation’s mission.

https://www.aaaicdrfoundation.org

]]>http://arbitration-blog.eu/aaa-icdr-foundation-grants/feed/0McGill Journal of Dispute Resolution. Call for papers!http://arbitration-blog.eu/mcgill-journal-dispute-resolution/
http://arbitration-blog.eu/mcgill-journal-dispute-resolution/#commentsThu, 21 Jan 2016 20:46:21 +0000K.Pilkovhttp://arbitration-blog.eu/?p=1405The McGill Journal of Dispute Resolution (MJDR) invites submissions of articles. The editorial board accepts submissions in both English and French. The next deadline is 15 February 2016. Please submit your articles or contact the editor if you have any questions at: coordinatingeditor.mjdr@mcgill.ca

The McGill Journal of Dispute Resolution (MJDR) is a bilingual, peer-reviewed, student-run academic journal dedicated to the presentation and promotion of high quality scholarship in the fields of arbitration, mediation, facilitation, negotiation and other forms of alternative dispute resolution.

The Journal’s mandate is to promote discourse and the exchange of ideas between prominent scholars, practitioners, law students and the public at large. The MJDR seeks to achieve its mandate through the provision of free, high quality peer reviewed scholarship from leading scholars in these fields.

The Permanent Court of Arbitration in The Hague has said it will consider a case against Russia by Ukrainian businessman and sometime politician Igor Kolomoisky who claims he was deprived of his right to operate a passenger terminal at a Crimean airport after Russia annexed the peninsula.

Kolomoisky, one of Ukraine's richest men, and Aeroport Belbek LLC, brought the case a year ago to the court, which said 6 January it would consider the claim regarding his contract to operate a passenger terminal at Crimea's Sevastopol International Airport until 2020, Reuters reports.

The claimants say Moscow has breached a bilateral investment treaty (pdf) with Kyiv, while Kolomoisky has estimated his losses linked to the airport at $15 million, according to Ukrainian media reports, Reuters says.

Five similar claims have been brought by private companies associated with Kolomoisky and a Ukrainian state-owned bank in a claim against Russia arising from the annexation of Crimea, according to the Global Arbitration Review.

Meanwhile, Crimean authorities have failed to auction off Black Sea properties belonging to Kolomoisky that were nationalized, as prospective buyers are frightened by the sanctions regime imposed against Russia, TASS reported.

The Hague-based court has 117 member states, including Russia, but Moscow says it has no jurisdiction over the Kolomoisky matter and so will not participate in proceedings, according to the court, which has not yet decided if it has jurisdiction to hear the case’s merits, Reuters says.

The Ukrainian billionaire is wanted for questioning in Russia in connection with accusations he was responsible for war crimes. Kolomoisky has in turn accused Russia of crimes against humanity, JTA reports.

Kolomoisky is co-founder of the banking chain Privatbank and has interests in energy, media, aviation, and metals. As governor of Ukraine’s Dnipropetrovsk region, he helped arm and finance local militia groups and volunteers fighting pro-Russian separatists, according to Reuters.

The court made a $50 billion award against the Kremlin to compensate former shareholders in Yukos, the oil company that was dismantled when its director, Mikhail Khodorkovsky, was imprisoned.

]]>http://arbitration-blog.eu/ukrainian-billionaire-suing-russia-over-crimea-arbitration/feed/0A position of Deputy Counsel with the Secretariat of the ICC International Court of Arbitrationhttp://arbitration-blog.eu/deputy-counsel-secretariat-icc/
http://arbitration-blog.eu/deputy-counsel-secretariat-icc/#commentsFri, 04 Dec 2015 18:46:47 +0000K.Pilkovhttp://arbitration-blog.eu/?p=1397The Secretariat of the ICC International Court of Arbitration is currently recruiting a Deputy Counsel for a team dealing principally with common law jurisdictions.

Applicants should be recently qualified lawyers ( i.e. Bar exam or equivalent) with professional experience in a legal environment. However, a formal legal qualification is not essential if a candidate can demonstrate sufficient legal training and experience in international arbitration, international and/or commercial law.

]]>http://arbitration-blog.eu/deputy-counsel-secretariat-icc/feed/0Recognition and Enforcement of Arbitral Awards – study on public policy (2015)http://arbitration-blog.eu/recognition-enforcement-arbitral-awards-public-policy/
http://arbitration-blog.eu/recognition-enforcement-arbitral-awards-public-policy/#commentsTue, 20 Oct 2015 15:25:41 +0000K.Pilkovhttp://arbitration-blog.eu/?p=1392The Subcommittee on Recognition and Enforcement of Arbitral Awards conducted over 2014/2015 a comparative study on 'public policy' as a defence to the recognition and enforcement of arbitral awards under the New York Convention. For such purpose, the Subcommittee has solicited and received reports from Arbitration Committee members reporting jurisdiction by jurisdiction on the treatment of public policy by the domestic courts in the context of enforcement of foreign arbitral awards.

Each country report indicates its author(s) who may be contacted with questions or suggestions.

If you have questions, comments or suggestions generally about the general and country reports, or if you want to prepare a country report for a country not yet covered by the study, please contact the Chair of the Subcommittee, Pascal Hollander, Hanotiau & van den Berg, Brussels, at pascal.hollander@hvdb.com.

]]>http://arbitration-blog.eu/recognition-enforcement-arbitral-awards-public-policy/feed/12015 International Arbitration Survey: Improvements and Innovations in International Arbitrationhttp://arbitration-blog.eu/2015-international-arbitration-survey/
http://arbitration-blog.eu/2015-international-arbitration-survey/#commentsTue, 13 Oct 2015 10:22:03 +0000adminhttp://arbitration-blog.eu/?p=1358The 2015 International Arbitration Survey (download) conducted by Queen Mary University of London (QMUL) is the third survey carried out in partnership with White & Case. The theme of this year's survey is improvements and innovations in international arbitration. The survey examined the effectiveness of past innovations and what could be improved in the future.

London and Paris are the most preferred venues for international arbitration. Hong Kong and Singapore are gaining momentum and are now ranked third and fourth.

Initiatives to further improve the efficiency of the arbitral process are welcomed. Arbitrators and arbitration counsel need to be more proactive in promoting efficiency, not just arbitral institutions.

70% of respondents think there is an adequate amount of regulation although specific areas require further 'micro-regulation'.

]]>http://arbitration-blog.eu/2015-international-arbitration-survey/feed/0Misen Energy AB submits investment dispute notice to the Government of Ukrainehttp://arbitration-blog.eu/misen-energy-investment-dispute-ukraine/
http://arbitration-blog.eu/misen-energy-investment-dispute-ukraine/#commentsFri, 09 Oct 2015 07:28:46 +0000K.Pilkovhttp://arbitration-blog.eu/?p=1350Misen Energy AB (publ) (“Misen”) has submitted an investment dispute notice to the Government of Ukraine under the Ukrainian Swedish Bilateral Investment Treaty (“BIT”). Misen notified Ukraine that a dispute has arisen between it and Ukraine concerning Misen’s investment in Ukraine, and invited Ukraine to resolve the dispute by consultation and negotiation.

As explained in previous announcements, the Ukrainian Government continues targeted discrimination against Misen’s investments in Ukraine by applying a 70% royalty on gas prices fixed by the regulator. If it continues to be applied, the 70% royalty will render it impossible for Misen to realize any return on its investments in Ukraine and ultimately may even force Misen to close its operations in Ukraine and lose the total value of its investment as well as the expected income for the 30-year life cycle of the investments, estimated at over USD 3 billion.
If the problems described in the notice of investment dispute cannot be settled with the Government of Ukraine within six months, Misen reserves its right to submit the dispute to international arbitration in accordance with the BIT.
Misen Energy AB (publ) is a Swedish upstream oil and gas company with operations in Ukraine. The company was founded in 2004 and its shares are since 12 June 2007 traded on Nasdaq First North Stockholm.
In 2011, Misen Energy AB (publ) acquired Misen Enterprises AB and its Ukrainian subsidiary, LLC Karpatygaz, including the rights to 50.01% of the revenue and profit from a gas production project in Ukraine. In consideration of this acquisition, a new share issue was carried out.
The gas producing assets have been acquired by production cooperation via a joint activity project governed by a Joint Activity Agreement between the wholly -owned direct and indirect subsidiaries of Misen Energy AB (publ), i.e. Misen Enterprises AB and LLC Karpatygaz (together 50.01%) and PJSC Ukrgasvydobuvannya (49.99%), the largest producer of natural gas in Ukraine and subsidiary of the National Joint Stock Company Naftogaz of Ukraine. The value of the assets is estimated to be substantially higher than the purchase price for Misen Enterprises AB. The purpose of the project is to significantly increase production of gas and oil by providing modern technologies via a large-scale
investment program.
The registered office of Misen Energy AB (publ) is in Stockholm and the shares are traded on First North under identification ticker MISE. The Certified Adviser of the company at Nasdaq First North Stockholm is Consensus Asset Management AB.

Eastern Europe-focused junior energy firm JKX Oil & Gas announced Monday that it has launched arbitration proceedings against the Ukrainian government under the Energy Charter Treaty – a bilateral investment treaty between the UK and Ukraine. JKX is looking to recover more than $180 million in rental fees that its Ukrainian subsidiary has paid on production of oil and gas in Ukraine since 2011. JKX said it is seeking compensation for "losses it has suffered from Ukraine's treaty violations", including "Ukraine's failure to treat JKX's investments in a 'fair and equitable' manner and failing to comply with commitments made by Ukraine in respect of JKX's investments."

JKX suspended its planned 2015 capital investment program in Ukraine on January 7, explaining that the move was prompted by the Ukrainian government's decision last November to restrict industrial users of natural gas to buying their gas solely form Ukraine's state-owned gas company Naftogaz. JKX noted that an Emergency Arbitrator, appointed under the Arbitration Rules of the Stockholm Chamber of Commerce, has already issued an Emergency Award that orders Ukraine to refrain from imposing royalties on the production of gas by JKX's Ukrainian subsidiary in excess of the rate of 28 percent (as opposed to the 55-percent rate currently applicable under Ukrainian law). JKX said the Emergency Award is binding on Ukraine under international law, but if Ukraine refuses to comply with the Award it will seek to have it recognized and enforced by the Ukrainian courts.

]]>http://arbitration-blog.eu/energy-charter-treaty-arbitration-against-ukrainian-government/feed/0LCIA Arbitration International Journal’s archive is openedhttp://arbitration-blog.eu/arbitration-international-archive/
http://arbitration-blog.eu/arbitration-international-archive/#commentsWed, 04 Feb 2015 21:37:27 +0000K.Pilkovhttp://arbitration-blog.eu/?p=1335Oxford University Press made Arbitration International Journal's archive temporarily available for free reading and downloading full pdf articles.

Launched in 1985, Arbitration International provides quarterly coverage for national and international developments in the world of arbitration. The journal aims to maintain balance between academic debate and practical contributions to the field, providing both topical material on current developments and analytic scholarship of permanent interest. Arbitrators, counsel, judges, scholars and government officials will find the journal enhances their understanding of a broad range of topics in commercial and investment arbitration.Launched in 1985, Arbitration International provides quarterly coverage for national and international developments in the world of arbitration. The journal aims to maintain balance between academic debate and practical contributions to the field, providing both topical material on current developments and analytic scholarship of permanent interest. Arbitrators, counsel, judges, scholars and government officials will find the journal enhances their understanding of a broad range of topics in commercial and investment arbitration.

]]>http://arbitration-blog.eu/arbitration-international-archive/feed/2Ukraine is awaiting the ruling of the Stockholm arbitration court in the gas disputehttp://arbitration-blog.eu/ukraine-stockholm-arbitration-gas-dispute/
http://arbitration-blog.eu/ukraine-stockholm-arbitration-gas-dispute/#commentsWed, 22 Oct 2014 11:24:28 +0000K.Pilkovhttp://arbitration-blog.eu/?p=1331Ukraine is awaiting the ruling of the Stockholm arbitration court concerning the temporary gas price in the gas dispute with Russia to appear late in November 2014, Ukrainian Prime Minister Arseniy Yatsenyuk has said.

Ukrainian state-run energy firm Naftogaz and Russian state-controlled gas firm Gazprom have both lodged cases with the Stockholm arbitration tribunal to review their gas transit contracts. All debt payments, on which Russia has been insisting, will be made only after a verdict from the International Court of Arbitration in Stockholm - (Reuters).

Ukrainian courts sometimes refuse to leave to enforce arbitral awards, and sometimes the reasoning of the refusal is very much controversial. For example, in 2014, a court refused to grant the leave to enforce an LCIA award, issued by a sole arbitrator on the ground that an arbitration agreement contained a reference to an «arbitration panel», and, according to the court,

“the word “panel” always refers to the collegial body. There is no linguistic reason to believe that the terms “arbitration panel” and “arbitration tribunal” have similar meaning”.

The court did not even check whether the respondent had made any objections with respect to the composition of the tribunal during the arbitral proceeding. In general, as shown by the practice analyzed in the survey, Ukrainian courts have developed a friendly attitude to arbitration and do not create significant barriers for arbitration agreements to be recognized and arbitral awards to be recognized and enforced.

Statistics of granting leave for enforcement of arbitral awards issued by the International Commercial Arbitration Court (ICAC) at the Ukrainian Chamber of Commerce and Industry (UCCI) in 2013-2014 was even more impressive: when requests are considered by the courts of first instance (i.e., not left without consideration, and the proceedings upon the request is not closed), in 2013 the claimant was granted with the leave to enforce in 93% of all cases; in 2014 the leave was granted in almost 77% of all cases. It should be noted that in 2014 in those cases when the leave for enforcement was not granted, this was largely due to the fact that the award was executed voluntarily (in 2013 the courts usually closed the proceedings in such a situation). It means that almost 91% of requests were satisfied in 2014. It is a good reason for foreign partners to think twice before insisting on “classical” arbitration when dealing with Ukrainian companies. In matters of setting aside arbitral awards Ukraine only seeks to enter the league of countries with arbitration-friendly court practice (20-30% of arbitral awards are successfully challenged).

Thus, common courts rarely refuse to enforce arbitral awards and in exceptional cases set aside arbitral awards. At the same time, further stages of the enforcement usually become time consuming and sometimes even ineffective process, which does not show any specific negative attitude towards arbitral awards because problems of enforcement are peculiar to all court decisions. It is true that Ukrainian courts grant interim measures in support of enforcement of arbitral awards in rare cases which certainly does not help the enforcement. At the same time, if compared with 2011-2012, in recent years there has been some progress in this matter –courts have begun to impose seizure on the debtor’s property in support of the enforcement of arbitral awards (app. 5 % of the left for enforcement arbitral awards were secured with the arrest of debtors’ assets in 2013-2014).

The report also made it possible to name the arbitration institutes and rules most frequently referred among Ukrainian parties. These are: ICAC at the UCCI, ICAC at the Russian Chamber of Commerce and Industry, SCC and LCIA. ICC and VIAC arbitral awards are also among the arbitration institutions well known in Ukraine.

English Worldwide Freezing Order (“WFO”) being called by Matthias Scherer and Simone Nadelhofer one of the “nuclear weapons” of commercial litigation and arbitration, is a preliminary injunction preventing a defendant from disposing of assets pending the resolution of the underlying substantive (arbitration or court) proceedings. Its issue in support of an arbitration proceeding significantly impacts further enforcement of an award. However, as WFOs are often sought without prior notice to the defendant, their recognition and enforcement may become problematic. Ukrainian courts only recently were addressed issues related to enforceability of WFOs.

There is no separate procedure for enforcement of foreign court orders on interim measures, thus formally the English WFO can be recognised and enforced as a foreign court judgement. Generally a foreign court judgment may be recognized and enforced in Ukraine either on the basis of a respective multilateral/bilateral international treaty of Ukraine, or in the absence of such treaty on the basis of the principle of reciprocity which existence is presumed by the domestic rules of civil procedure (the Code of Civil Procedure of Ukraine, the CCP). As there is no international treaty governing issues of recognition and enforcement of court judgments in civil and commercial matters between Ukraine and the United Kingdom, English court judgments are enforceable in Ukraine on the basis of the reciprocity principle.

Upon receiving an application for recognition and enforcement, the court shall notify the debtor against whom the recognition and enforcement is sought and establish a one month term for filing objections by the debtor. Upon receiving objections or upon the expiration of the term for objection, the court appoints the hearing and shall notify the parties of the place and time of the hearing at least 10 days before it takes place. During the hearing, the parties have the right to give statements and provide explanations. The court can hold the hearing and issue a ruling in absence of any of the parties, if that party was properly notified of the hearing. The court is obliged to issue its ruling within two months after the proceedings are instituted, but this term can be prolonged. The approximate time of the proceedings in the court of first instance (district court) is 2-7 months.

The law does not establish any particular terms in which the enforcement can be granted. The court is not entitled to make any changes to the foreign court judgments left to enforcement. As a WFO would be considered as a foreign court judgment, the competent Ukrainian court cannot impose any conditions of its enforcement (e.g. deposit or promise to compensate loss caused by that enforcement). Taking into account that a WFO is an interim relief and its enforcement does not require any Ukrainian interim measures, we also believe that Ukrainian courts would not grant any additional interim relief. The ruling of the court on recognition and enforcement of foreign court judgment and arbitration award is subject to an appeal following general procedure.

However, the competent Ukrainian court may refuse to recognize and enforce a WFO upon one of the grounds listed in Article 396 of the CCP. Among those grounds there is a situation when a defending party did not have an opportunity to participate in the court proceedings because it was not properly notified of time and place of the hearing. This makes foreign court judgments issued against individuals and legal entities which were not joined to the proceedings (non-cause of action defendants (“NCADs”)), practically unenforceable in Ukraine.

II. Enforcement of WFOs against shares

Even if a WFO has been issued against a cause of action defendant (‘CAD’) its enforcement against shares in an NCAD-resident of Ukraine, belonging to that CAD may face problems. An application for enforcement of a foreign court judgment is submitted to a general court at the location of the debtor (CAD in foreign proceedings). If the debtor has no location in Ukraine or the debtor’s location is unknown, the application shall be filed with the court having jurisdiction over territory of location of the debtor’s assets in Ukraine. (Full article available at Publications).